Downturn in the Australian coal industry

In the meantime New Zealand miners who have lost jobs are hoping to find work  in Australia.

Xstrata to restructure Australia ops, cut 600 jobs

-- Xstrata to restructure Australian coal unit, cut 600 jobs

-- Cutbacks prompted by low coal prices, high production costs, strong Australian dollar

-- BHP Billiton stops production at Gregory coal mine

Marketwatch,

10 September, 2012

Xstrata PLC , the world's largest seaborne exporter of thermal coal, said Monday it will cut around 600 jobs in a restructure of its Australian operations, making it the latest company to cut costs in the face of a slowdown in the country's mining boom.

The cuts will involve both outside contractors and full-time workers at its Australian coal operations, with a consultation process beginning immediately. A spokesman said some staff cuts would come from its corporate headquarters in Sydney and a consolidation of its Queensland offices, from three at present to just one.

"Although we are not breaking down the reductions by individual site, the restructure is focused on scaling back high cost production at some of our mines," the company said.

The move comes as the resource-rich nation's mining boom loses momentum amid weakening demand from key customer China, where the market for industrial commodities has cooled with its slowing economy. Over recent weeks there have been major cutbacks by other Australian miners, including BHP and Fortescue Metals Group Ltd. (FMG.AU), which last week said it would slash spending and cut jobs as soft iron ore demand from China dragged the commodity's price to near-three year lows.

On Monday, BHP Billiton Ltd. (BHP) also announced it will cease production at its Gregory metallurgical coal mine in Queensland state and said it will keep its other assets under review, citing similar cost issues. BHP said the open-cut Gregory operation was "no longer profitable in the current economic environment of falling prices, high costs and a strong Australian dollar."

Xstrata described its own cutbacks as a response to these industry-wide pressures. The price of thermal coal has slumped by one-quarter so far this year.

"Ongoing reviews continue across the business to ensure that Xstrata Coal retains a highly competitive cost position in the current market environment," the company said in an emailed statement.

In August, BHP delayed or scaled back projects together worth more than US$50 billion, including its major expansion of Olympic Dam in South Australia. The multi-billion dollar cut to its spending plans sparked suggestions the country's mining boom has peaked.

Resources giant Rio Tinto PLC (RIO) has also reined in its operations, closing an office in Sydney and shrinking its regional headquarters in Melbourne, and delayed an investment decision on its proposed Mount Pleasant project in New South Wales state.

Mining services contractors have cautioned global markets over the uncertain outlook for the industry, citing worries over the euro zone debt crisis, slowing growth in China and tight credit conditions. Late last month, drilling major Boart Longyear Ltd. (BLY.AU) was forced to downgrade its expectations for full-year earnings as its Chief Executive Craig Kipp said the mining industry was "in a state of flux."

Still, Xstrata's spokesman said the company doesn't expect its cutbacks to have a significant affect on the miner's Australian production volumes.

Xstrata's already-committed growth projects, including Ravensworth North, Ulan West and the expansion at Rolleston, will go ahead as planned, he said, as will feasibility studies on its proposed 6 billion Australian dollar (US$6.2 billion) Wandoan coal development in Queensland.

More jobs go as coalmines shut down

Australia's coal industry continues to shed workers, with more than 2000 jobs lost this year as thermal and metallurgical coal prices slide, costs rise and Chinese demand softens.

SMH,

11 September, 2012

The BHP Billiton Mitsubishi Alliance (BMA) yesterday confirmed it would close the Gregory open-cut project, the industry's fifth mine closure this year, with the loss of 300 jobs, and Xstrata Coal said it would sack 600 workers across Queensland and New South Wales.

The downturn in the sector is so rough that staff at Rio Tinto's Coal & Allied subsidiary are being told to cut back on witches hats and recyclable cups.

In an internal memo on Thursday, the general manager at C&A's Mount Thorley Warkworth division, Cam Halfpenny, warned of a ''culture of waste'' that needed to improve, telling workers the operation used 800 witches hats a month - at $8 each - costing $80,000 a year.

Advertisement

Staff were also getting through 1400 recyclable cups a day, costing $120,000 a year.

Markets for both thermal and semi-soft coking coal products have softened significantly over the last two quarters, which, alongside the strong Australian dollar, was ''resulting in very real profitability pressures on our business'', Mr Halfpenny said.

''[We] must react to this pressure with a change to our cost structure and spending habits.''

Mr Halfpenny said Mount Thorley Warkworth's costs per tonne were higher than current spot coal prices and although contract prices were high, ''we need to position the business to be sustainable should current spot prices persist''.

The Gregory closure, effective next month, follows BMA's Norwich Park shutdown in May, with the loss of about 500 jobs.

Andrew Vickers, general secretary of the mining and energy division of the CFMEU, said union delegates would meet at Mackay today to consider the enterprise bargaining agreement reached after protracted industrial disputes in Queensland. Fresh strike action was ''unlikely'', he said.

Mr Vickers reckoned more than 2000 jobs had been lost this year, including 400 in Rio Tinto's closure of the Blair Athol mine and downsizing at Clermont, and another 200 lost due to Anglo's closure of Moranbah North.

''Mining companies are doing what they have always done, they start sacking people before they know exactly what's going to occur,'' he said.

During the global financial crisis about 2500 jobs were lost, mainly in the Queensland coal industry, Mr Vickers said, but nearly all those workers were back on in six months.

He did not expect a similar rebound this year, because world coal supply had increased.

In early August Xstrata Coal chief Peter Freyberg told investors at the company's half-yearly earnings results in London that thermal coal prices were recovering and the market had ''probably bottomed about a month ago''.

Not all Xstrata Coal's job losses will be in the mines: the company is also consolidating three Queensland offices into one and cutting roles at its Sydney headquarters.

Xstrata said approved growth projects, such as Ravensworth North, Ulan West and the Rolleston expansion, were proceeding as planned.